Commercial Real Estate Confidence

National Real Estate Investor released their comprehensive outlook for 2011. (Commercial Real Estate)

The title of the outlook: "Investor Confidence Surges."

Surges in an understatement.  Marcus and Millichap performs a quarterly poll of the confidence in the commercial real estate market, and the quarter ending 2010 clocked in at the highest reading ever at 152, surpassing the euphoria reached during the peak of the real estate bubble back in 2005!

The chart below shows the astonishing results as investor confidence skyrocketed over the previous quarter:

Here's where it gets interesting.  Of these investors who believe that real estate prices have bottomed, 88% believe that interest rates will be higher by 2012.

Am I living in a bizarro world?  If interest rates are at all time record lows, and 88% of investors believe they will be higher by 2012, how can investor confidence be at all time record highs?

(Please see Rising Rates: Simple Economics for a primer on interest rates and real estate values)

This will not end well for over-leveraged investors entering the market today.